The Charitable Industrial Complex: "Charitable" Telemarketing by Professional Fundraisers Mostly Funds Professional Fundraisers

If you're thinking of giving to charity this holiday season, you might want to take a second to find out where your money is going.

A report released today by New York Attorney General Eric Schneiderman found that a staggering amount of the money raised by charitable telemarketing winds up going to pay the telemarketing companies, and all too often, little if any money actually makes it to the cause in question.

How bad is it? Schneiderman investigated 602 charitable telemarketing campaigns from 2011, which together raised more than $240 million. In 78 percent of the campaigns, less than half of the money raised actually went to the charity. In 76 of the campaigns, the charity actually lost money on the deal -- zero money went to the cause, and the charity paid the telemarketers out of pocket.

New York City organizations fared slightly better than average, with about 46 percent of money raised going to charity. Long Island charities were the worst in the state, keeping a scant 27 percent.

There's a pattern here -- the percentage of gross receipts from New York charitable telemarketing campaigns has hovered between 30 and 40 percent for the past decade.

That's not to say that different charities and telemarketing companies aren't better than others. Oxfam America, USAFA Endowment, and Childunf International al lkept more than 90 percent of their telemarketing revenues. They were the only ones.

But according to the Attorney General's report, if you donated to Beth Israel Deaconess Medical Center through a telemarketer last year, exactly none of your money found its way to its intended target. Same for the Brooklyn Botanic Gardens, the Christopher Reeve Foundation, Ducks Unlimited, Feed the Children, the Food Bank for New York City, and the International Rescue Committee, to name a few.

Why big-name charities accept such a miserable return on investment isn't clear. The Attorney General's report urges board members to ask themselves: "Why are we allowing such a high percentage of our donations to be paid to a for-profit professional fundraising company? Is that really the best we can do?"

Giselle Holloway, director of direct response for the International Rescue Committee, argues that the Attorney General's report doesn't capture the full picture. The report is correct that the IRC took an immediate loss on the three telemarketing campaigns in ran in 2011, she says,

"But there's a very good reason for that. Those were "monthly giving" or "sustainer" campaigns. We use the telemarketing to have a conversation on why monthly giving is important. Initially when we call these donors, it costs us 36 to 50 dollars to convert a supporter to a monthly donor. We realize it's a loss up front, but that cost is recouped in the first three to five months, because those donors are now giving automatically."